VA Loan Example
Scenario
Client B.R. is a disabled military veteran currently working as an investment banker. He was purchasing a new primary condominium in Manhattan. Although B.R. could have put down at least 20% for a regular Fannie Mae loan, his VA benefit entitled him to 100% financing at rates that were better than Fannie Mae, even with 20% down. Further, as a disabled veteran, there would also be no Funding Fee requirement which would normally have been 2.15% of the loan. There are very few VA approved condominiums in the NYC area. Most condominiums also have a right of first refusal, which is typically an automatic rejection for VA approval.
Solution
We worked with the management company and their insurance company to gather all of the required building information. It turns out that the building would not have qualified for Fannie Mae eligibility. However, VA (and FHA) have different requirements for eligibility. We were able to get a one-time approval for the buyer without the need for full building approval. Once the documents were submitted, we had VA “spot” approval within a few days, and the borrower was able to close well within his required timeframe.
FHA Loan Example
Scenario
Client D.B. and his family were looking to purchase a new home. They sold their former home and had been renting for just a few months, eagerly looking forward to putting the proceeds from their sale into a new home. Unfortunately, the credit scores were too low to qualify for a conventional Fannie Mae loan, and also below the threshold for most lenders who work with FHA. D.B. had already notified his landlord that he was vacating the apartment and even lined up someone to take it over with a new executed lease.
Solution
We advised D.B. to pay down a few of his credit cards to balances below 10% of the available line. We then pulled a new credit report immediately after the cycle end date, and his credit score jumped over 30 points! In conjunction with an explanation for circumstances beyond his control, we were able to get his FHA loan approved.
D.B. and his family are now happily living in their new home!
DSCR Loan Example
Scenario
Client M.S., who is recently retired, was purchasing a new home in the same area where he has his current primary residence. Since his retirement, M.S. had been unable to show sufficient income for the new purchase.
Solution
We did the purchase as an investment property using a Debt Service Coverage Ratio (DSCR) loan, using just the expected rental income on the property as determined by the appraiser, even though the house was vacant. The income is then compared to the total housing expense consisting of the mortgage payment, property taxes, and homeowners insurance. The rental income came in far below what was anticipated, BUT because M.S. had a sufficiently high credit score and at least 25% to put down towards the purchase, he was able to qualify for the loan.
M.S.'s plan is to eventually sell his current primary home and pay off the loan on the new property!
Non-QM Example
Scenario
Client M.B., who is self-employed, was purchasing a new primary home condominium to scale down from her house. She owned her current house with substantial equity. Instead of getting a loan on the new condo and having to get the condominium building approved as well, she did a cash-out refinance on her primary home to purchase the condominium in cash. She was able to win the bid with a no-mortgage contingent offer since her mortgage was on her current house, not the condo being purchased. She took out a new mortgage with an interest-only payment for $850,000 on her current home, consisting of almost all cash-out. There was NO limit on the cash-out, which most lenders would require since she still had a relatively low loan-to-value. In addition, because she had substantial deductions on her tax return, she would not have qualified using conventional loan documentation.
Solution
We used her business bank statements for the past 12 months to quality her using just her business deposits. Since the deposits were also insufficient, we were able to supplement her income using asset utilization, including retirement assets (even though she wasn't yet retired), dividing the available assets over 60 months to get her qualified. We just needed the bank statements—no need to liquidate or use the assets at all.
She closed on her loan, and she will shortly close on the purchase of the condominium in cash, and then sell her current primary home and pay off the mortgage!
